The first VC firm to ‘generally solicit’

FORTUNE -- This morning ff Venture Capital will become the first VC firm to take advantage of the SEC's new general solicitation rules, which allow companies and investment firms to publicly seek capital from accredited investors.

The New York-based firm focuses on seed and early-stage companies that "deploy lightweight disruptive business models to become the low-cost player in their respective market." Its biggest hit to date is probably Cornerstone OnDemand (csod), while current portfolio companies include Indiegogo, Klout and MovableInk.

ff Venture Capital raised $27 million for its third fund in 2010, and late last year began targeting between $50 million and $75 million for a new vehicle that would include a sizable allocation for select follow-on rounds (something the smaller fund sizes didn't permit). It already has held multiple closes, but is opting to generally solicit for the stretch run.

“No one seems to want to go first, even though the way all of us raise capital is so old-fashioned,” says John Frankel, a founding partner of ff Venture Capital. “Most of our LPs are friends, or friends of friends or friends of friends of friends. The firms that generate the best returns aren’t really allowed to tell anyone…

As part of that transparency, Frankel says that ff Venture Capital has generated a gross IRR on invested capital in excess of 30%, and adds that the gaudy figure has held consistent over all of its existing funds. He does not plan to put a private placement memorandum online, but may publish a generally-available pitchdeck and hold a final close sometime next month."

I also asked Frankel about the two hangups that, so far, seem to have prevented other VC firms from generally soliciting: (1) Accredited inverstor verification requirements that could prove uncomfortable (i.e., asking high-net-worth investors for W-2 forms or bank statements); and (2) Being perceived as unable to raise capital via traditional means (i.e., desperate).

On the first one, Frankel believes that letters from certified public accountants will suffice. He also expects that some investors will utilize third-party accreditation verification services being provided by such firms as SecondMarket (which may run issuers between $12-$50 per certification). On the second, he admits he's hedging a bit by jumping into this when his fundraising is almost complete.

"We’ve raised the majority of our capital already for this fund without generally soliciting, but we wanted to make a principled statement here.”

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